Community Heritage Financial, Inc. Reports Earnings for the Third Quarter of 2020

MIDDLETOWN, Md., Oct. 16, 2020 /PRNewswire/ -- Community Heritage Financial, Inc. ("the Company") (OTC Pink: CMHF), the parent company for Middletown Valley Bank ("MVB") and Millennium Financial Group, Inc. ("Mlend"), announced today that for the quarter ended September 30, 2020, the Company earned net income of $1.201 million or $0.53 per share compared to net income of $849 thousand or $0.38 per share for the second quarter of 2020. Net income for the quarter ended September 30, 2020 as compared to the quarter ended September 30, 2019 was up $201 thousand from $1.000 million in 2019 and earnings per share increased $0.09 per share from $0.44 per share in the third quarter of 2019.  Year-to-date earnings per share through September 30, 2020 stands at $1.14 per share compared to $0.92 per share through the third quarter of 2019.

The COVID-19 pandemic continues to impact daily life and the economies of the United States and the world markets.  The ever-changing conditions and uncertainty have caused business and government agencies to react and adapt quickly to survive during these unprecedented times.  The banking industry was not spared and was asked to support and help stabilize local economies as the country worked through the crisis.  Community Heritage Financial, Middletown Valley Bank and Millennium Financial remain deeply committed to the communities we serve.  Mlend and MVB accepted and processed the highest number of residential mortgage loans for a quarter in the history of the company during the third quarter and MVB grew $23.7 million in net commercial loans (outside of PPP loans) in support of small businesses in the community.  While the pandemic continues to evolve, the bank has taken steps to return to normal operations and has adapted to the current conditions taking utmost care in serving our customers in a safe and efficient manner.

Quarterly Highlights – 3Q20 vs 2Q20

• Net book value per share increased to $22.91 per share in the third quarter, up $0.48 per share, or 2.1% compared to $22.43 in Q2 of 2020. Tangible book value per share increased by $0.47 or 2.1% to $22.17 per share compared to $21.70 at June 30, 2020.
• Cash balances decreased significantly quarter over quarter compared to Q2 of 2020. In Q1 of 2020 the bank added on-balance sheet funding in the form of $35 million in brokered deposits and $30 million in FHLB advances to increase on-balance sheet liquidity at the outbreak of the pandemic. As a result of strong core deposit growth, the FHLB advances were extinguished in Q2 of 2020 and $16.4 million of the brokered deposits matured in Q3 of 2020 and were not renewed. Cash was further used to fund net loan growth of $30.3 million for the quarter. The bank also continued to strengthen off-balance sheet contingency funding sources (FHLB and FRB discount window borrowing capacity) keeping the overall contingency funding position strong at approximately 42% of total funding at the bank level as of September 30, 2020.
• Net loans grew by $30.3 million for the third quarter of 2020 with $30.1 million in core growth and an additional $206 thousand in PPP loans. At the end of Q3 the bank had a total of $64.0 million in PPP loans on the balance sheet. Core growth for the quarter came from $6.4 million in residential mortgages and $23.7 million in commercial real estate and C&I loans.
• Overall deposits were down $6.9 million for the third quarter; however, the decrease includes the retirement of $16.4 in brokered deposits. Excluding the brokered deposits, as noted, core deposits grew by $9.5 million for the quarter with most of the growth in demand, money market and savings related deposit products.
• Through the deployment of cash and a reduction of 22 basis points in the cost of funds, quarter over quarter bank normalized margin (excludes impact of PPP loans and fees along with extra funding cost through FHLB advances and Brokered deposits) increased from 3.48% in Q2 of 2020 to 3.61% in Q3 of 2020.
• Provision expense was $1.02 million for the quarter, up from $706 thousand in the second quarter. While credit quality metrics remained strong, metrics such as unemployment and GDP along with a COVID factor moved provision expense higher for the quarter. The increased provision moved the "loan loss reserve to total loans" ratio to 1.22% at the end of September, up from 1.12% for June 30, 2020.

Quarterly Highlights – 3Q20 vs 3Q19

• Net book value per share of $22.91 represents a $1.52 or 7.1% increase over September 30, 2019 book value of $21.38 per share. Tangible book value per share also increased by $1.52 or 7.4% on a year-over-year basis.
• Year over year net loan growth compared to September 30, 2019 was $142.6 million, which includes $64.0 million in PPP loans. Excluding the PPP loans, core loan growth was $78.6 million or 19.4% year-over-year.
• Deposits grew $154.8 million compared to Q3 of 2019 on a year-over-year basis. Excluding additional brokered deposits, core deposits increased $136.3 million year-over-year or 31.5%. Most of the growth was in demand deposits ($64.4 million) and low interest cost money market and savings ($68.6 million).
• Third quarter normalized margin for 2020 at 3.61% came in 6 basis points higher than third quarter margin for 2019 of 3.55%. While loan yields have decreased due to market pressure, the bank has been able to maintain margin by cutting the cost of funds in half, from 0.98% in September 2019 to 0.48% in September of 2020.
• Year-to date loan loss Provision expense through Q3 of 2020 totaled $2.1 million, an increase of $1.4 million compared to $673 thousand through Q3 of 2019. Loan growth and economic metrics due to the pandemic (unemployment, GDP) account for the increased provision expense.
• On a year-to-date basis, non-interest income grew by $2.826 million compared to non-interest income through Q3 of 2019. Mortgage activity and secondary sales income account for $2.802 million of the increase with very strong activity during Q3 of 2020.
• Non-interest expense through Q3 of 2020 was up $2.4 million compared to Q3 year-to-date 2019. Approximately $900 thousand of the increase is directly related to the increased mortgage volume (commissions, processing, investor fees) noted above while the remaining increased expense is related to additional technology, staffing and processing costs associated with rapid asset growth (38% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on October 16, 2020 for stockholders of record as of October 30, 2020 and payable on November 6, 2020.

This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by the use of forward- looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates" or similar terminology. Such statements, specifically regarding the Company's intentions regarding transparency, growth and market expansion, are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, changes in interest rates, stock market liquidity, deposit flows, loan demand and real estate values, as well as changes in economic, competitive, governmental, regulatory, technological and other factors which may affect the Company specifically, its existing and target market areas or the banking industry in general. The realization or occurrence of these risks or uncertainties could cause actual results to differ materially from those addressed in the forward-looking statements.

Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-3055
www.communityheritageinc.com

 

Community Heritage Financial, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
Balance Sheet		September 30,		September 30,			June 30,		December 31,
		2020		2019			2020		2019
		(unaudited)		(unaudited)			(unaudited)		(audited)
Cash		$                15,094		$               19,725			$            49,756		$              25,065
FHLB Stock		462		392			462		392
Investments, at market value		67,441		37,128			69,518		42,641
Loans, net of Reserve		548,828		406,185			519,333		425,099
Loans Held for Sale		21,670		5,208			13,525		3,775
Fixed assets		9,244		10,088			6,612		6,815
Goodwill/Intangible		1,668		1,654			1,670		1,674
Other assets		11,113		8,359			12,598		11,506
Total Assets		$              675,519		$             488,739			$          673,475		$            516,967
Deposits		$              587,927		$             433,081			$          594,897		$            446,706
Subordinated debt, net of unamortized
issuance costs		14,641					14,619		14,574
Accrued interest payable		445		109			235		280
Borrowings		10,577		-			5,784		289
Other liabilities		10,356		7,408			7,441		6,483
Total Liabilities		623,946		440,598			622,976		468,332
Equity		50,702		47,913			49,591		48,412
Unrealized gain(loss), net of tax		870		228			908		223
Total Equity		51,572		48,141			50,499		48,635
Total Liabilities & Equity		$              675,519		$             488,739			$          673,475		$            516,967
Community Heritage Financial, Inc. and Subsidiaries
Consolidated Statements of Income
		For the Three Months Ended					For the Nine Months Ended
Income Statement		September 30,		September 30,			September 30,		September 30,
		2020		2019			2020		2019
		(unaudited)		(unaudited)			(unaudited)		(unaudited)
Total interest and fee income		$           6,146,099		$          5,332,701			$     17,529,079		$       15,593,503
Total interest expense		1,036,252		1,081,229			3,608,720		3,232,381
Net interest income		5,109,847		4,251,472			13,920,359		12,361,122
Provision for loan losses		1,023,596		191,866			2,087,344		672,515
Net interest income after provision		4,086,251		4,059,606			11,833,015		11,688,607
Non-interest income		2,954,161		1,483,307			6,108,289		3,282,158
Non-interest expense		5,417,641		4,148,823			14,506,837		12,096,484
Merger expenses & one-time items		-		-			-		77,596
Pre-tax net income		1,622,771		1,394,090			3,434,467		2,796,685
Income taxes		421,791		393,690			874,233		731,997
Net income		$           1,200,980		$          1,000,400			$       2,560,234		$         2,064,688
Earnings per common share, basic and diluted
		$0.53		$0.44			$1.14		$0.92

 

Community Heritage Financial, Inc. and Subsidiaries
Selected Financial Data
		September 30,		September 30,				December 31,
		2020		2019				2019
(dollars in thousands)		(unaudited)		(unaudited)				(audited)
Total Assets		$           675,519		$          488,739				$            516,967
Loans		548,828		406,185				425,099
Goodwill		1,668		1,654				1,674
Deposits		587,927		433,081				446,707
Shareholder's equity		51,572		48,141				48,635
Nonperforming Assets:
Accruing troubled debt restructures		$                  681		$                 708				$                   701
Loans 90 past due and still accruing		294		-				-
Nonaccrual loans		1,246		1,206				1,155
Foreclosed properties		-		-				-
Total nonperforming assets		$               2,221		$              1,914				$                1,856
		For the Three Months Ended				For the Nine Months Ended
		September 30,		September 30,		September 30,		September 30,
Summary of Operating Results		2020		2019		2020		2019
(dollars in thousands)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Pre-allowance for loan loss provision, pre-tax net income		$        2,646,367		$       1,585,956		$      5,521,811		$         3,469,200
Allowance for loan loss provision, pre-tax		1,023,596		191,866		2,087,344		672,515
Tax expense		421,791		393,690		874,233		731,997
Net Income		$        1,200,980		$       1,000,400		$      2,560,234		$         2,064,688
Charge-Offs		$                    12		$                   21		$                  49		$                   164
(Recoveries)		(9)		(6)		(29)		(21)
Net charge-offs		$                      3		$                   15		$                  20		$                   143
Per Common Share Data
Basic earnings per share		$0.53		$0.44		$1.14		$0.92
Common shares outstanding		2,251,320		2,251,320		2,251,320		2,251,320
Weighted average shares outstanding		2,251,320		2,251,137		2,251,320		2,248,653
Dividends declared		$0.04		$0.03		$0.12		$0.09
Book value per share		$22.91		$21.38		$22.91		$21.38
Tangible Book Value per Share		$22.17		$20.65		$22.17		$20.65
Selected Unaudited Financial Ratios
Return on average assets		0.72%		0.83%		0.55%		0.59%
Return on average equity		9.29%		8.35%		6.77%		5.88%
Allowance for loan losses to total loans		1.09%		0.98%		1.09%		0.98%
Allowance for loan loss less PPP loans		1.22%		0.98%		1.22%		0.98%
Nonperforming assets to total loans		0.45%		0.46%		0.45%		0.46%
Net charge-offs to average loans		0.00		0.00%		0.01%		0.04%
Community Bank Leverage Ratio (bank only)		9.24%		9.45%		9.24%		9.45%
Average equity to average assets		7.70%		9.99%		8.06%		9.97%
Net interest margin (bank normalized) *		3.61%		3.55%		3.59%		3.73%
Loan to deposit ratio		94.37%		91.50%		94.37%		94.72%
*Normalized margin excludes impact of PPP loans and related on balance sheet liquidity through Brokered deposits and FHLB Borrowing

 

 

 

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SOURCE Community Heritage Financial, Inc.